Opponents file to limit hospital bonds

Linda SatchwellStaff Writer11/25/2009

“The gauntlet was thrown down” Nov. 16, according to Plumas District Hospital’s Chief Executive Officer Richard Hathaway. That day, Skip Alexander and attorney Robert Zernich, along with Bob Herr, Dennis Clemens and Martin Brutlag, began the process to have an initiative election that would effectively limit property tax payments for PDH’s Measure A bonds to $50 per $100,000 of assessed home value. Alexander and Zernich felt that would be the best way to stop the hospital from selling the bonds when there is no tax limit. Zernich admitted that the limited rate probably wouldn’t pay for the new hospital building. Hathaway said the initiative, if successful, would stop the project. The practical problem with the plan is that upon examination it appears that Proposition 218 does not allow for an initiative of this sort. According to the paperwork provided by Alexander and Zernich, Proposition 218 provides the legal authority for an initiative to limit the tax rate charged to homeowners for the hospital bonds. “Proposition 218 allows voters to reduce or repeal any local tax, assessment, fee or charge. Presently there is no limit or ceiling on the highest rate the hospital board of directors can charge as a tax rate. Therefore, this initiative reduces and sets the maximum tax rate for the life of the bonds.” There is an essential problem with the Proposition 218-based initiative, however. As explained by the California Legislative Analyst’s Office, very few taxes will be affected by the Proposition 218 legislation. At the top of the list of those “not directly affected” are property taxes. There is a distinction between property taxes and property assessments and fees. The latter two fall under 218, while the former does not. Put simply, the initiative has no legal grounds under Proposition 218. Alexander and Zernich had to take the initiative paperwork to Hathaway to sign. (In an ironic twist, the district would have to pay for the election that would stop it from building the new building.) Response to the move was varied. Some parties repeated their previous rhetoric. From others, there were significant shifts. Alexander and Zernich, who feel the Measure A ballot was confusing at best, want to take back the control of the tax dollars they feel they signed away when they voted for Measure A. Hathaway, who has worked to make this new hospital a reality since he came to Quincy in 2001, believes he understands the requirements for the hospital in terms of structure and function. When asked his reaction to the initiative filing, he fell back on the seismic requirements argument. Currently, PDH has until 2013 to meet Office of Statewide Health Planning and Development’s seismic requirements, or it will be subject to closure. In fact, Hathaway said that if this initiative passed, “the hospital will close,” because it won’t be able to meet the seismic standards. When questioned about the potential extension until 2030 that the hospital has applied for, he called it the stuff of dreams. Information Officer [of] Public Affairs David Byrne said OSHPD had sent a letter Sept. 15 to PDH Facilities Manager Dan Brandes stating it would be giving PDH an answer on the extension in the next several months. In e-mail correspondence on Nov. 18, Byrne wrote it is likely PDH will have an answer from OSHPD in December 2009. Further, he wrote that 75 percent of hospitals that have applied for the extension would receive it. “The biggest factor is whether a hospital building is close to a large fault line,” which PDH’s buildings definitely are not. When Hathaway was told about the OSHPD conversation, he said he’d been working with the agency for a long time, and he was still skeptical the extension would happen. He said, as well, that even if PDH receives it, there are the hospital’s infrastructure problems to consider. PDH has a 50-year-old building that he and the board members say is falling apart. Further, to retrofit it to OSHPD standards would be more expensive than constructing a new facility he said. If PDH gets the likely extension, however, it could conceivably retrofit and fix infrastructure problems as they came up. There isn’t a time limit imposed by OSHPD for these upgrades prior to 2030. Hospital board member John Kimmel and board chairman Dr. Mark Satterfield had a different take on things. One good thing that came out of the Alexander-Zernich initiative was that it got their attention, admitted Satterfield. He and Kimmel are both committed to making certain the voters are with them before they proceed with the sale of the bonds. Satterfield was genuinely surprised there were community members who feared the board would go ahead with the sale no matter what the people wanted. Kimmel volunteers his time, because he believes in this community. He’s hurt that after giving 12 years to the board, people are painting him as a villain. “It’s ridiculous that some of these people that I don’t even know say we intentionally did it. That’s the farthest from the truth.” At this point, a lot of things will have to go right before board members will consider issuing the next set of bonds, Kimmel said. Bond rates will have to come down, and the board is still trying to find places to cut costs. They’ve gone back to their bond counselor, who has estimated what the taxpayer’s costs would be, factoring in a current, conservative interest rate and a conservative projected growth in assessed value. In addition, Satterfield has done his own research into Buy America Bonds, which are part of the stimulus package and come with a lower interest rate. He said the hospital is looking at whether it can put in more cash, and it is also researching the possibility of bond insurance, which brings the rate down the same way that buying points on a mortgage does. According to Kimmel, “Ethically, we’re trying to maintain what we said on the ballot and keep it in that range.” He admits, however, that in the current economy the measure’s estimated tax high of $87.30 won’t be possible. “But, maybe if we can keep it at $125 or $135 ... I’m hopeful that we can have a sense that the public is behind us or not behind us if we can get it in that range.” In addition, he said the plans are finished, but construction hasn’t begun, which means that the board has the ability to sit tight for years. “We’re in wait mode ... if it isn’t feasible, then we never exercise those bonds and maybe we do something else with the money we have left over, or we try to pay back the taxpayers. We have eight years to do it.” He also agreed the language of the ballot understandably confused many people. “The ballot was screwed up; there’s no question about it,” he said. Kimmel and Satterfield still feel it’s in the community’s best interest to build the new hospital building. If it doesn’t happen now, Quincy will be facing the same problem in another 10 years. But Kimmel understands public frustration with both federal and state government. “I think they’re saying, we’re tired of taxes and this is one place we can control it—so stop.” Kimmel would like to poll the community, rather than have an expensive and divisive election, to get a sense of what the community is willing to pay. “I really do feel, if we have to go beyond the ball park area that we promised, I think we do need to say ethically, are you guys still behind us?” Kimmel was also pleased to hear of the likely seismic extension to 2030, but he didn’t feel seismic requirements were the real reason to build anyway. Satterfield, who has been on the board for 20 years, agreed. This hospital was built in 1959 with the help of federal Hill-Burton funding, and everyone involved with the building from staff to administration to board members, says the old building needs extensive work. According to Satterfield and Kimmel, the board has been over plans, ideas and downsizing ad nauseum. “We’ve gone through 50 to a 100 different scenarios,” said Satterfield. “Most were vastly more expensive ... over the past 12 years, we’ve massaged this thing to death, made it as small as possible to still meet the basic requirements.” Still, he said, “we have to be responsive to the needs of the community ... we won’t charge ahead without the community behind us.” He added there is a “certain critical mass” in rural hospitals, however. “Once they begin to get out of surgery, obstetrics—they’ll end in extinction.” This bothered him for several reasons. The more obvious one is a healthy hospital is part of a healthy community, especially in an area that will move, inevitably, from a logging center to one that’s based more on retirees. The other reason is less obvious: good, safe OB care is the “biggest challenge” he said. This is a vital service to the significant segment of the community that can’t afford to go to Reno, Nev., to deliver. Many of these women, he said, don’t have a car that will get them there, nor can they afford the gas. He feels providing for them is an important part of PDH’s mission. Satterfield admits the board “lost control of how much we understand where the people are coming from.” When asked if he would consider a meeting with proponents of the initiative and an outside facilitator to bridge the divide and come up with an equitable plan that residents would support, he was very enthusiastic. It’s been done here before, he said, citing the Quincy Library Group. A facilitator would be worth paying for, he continued. “I’d pay it out of my own pocket if I had to.” He’d like to see the community that he’s worked for and lived in for so long work this out, rather than battle it out. It bothered him, as it did Kimmel, that bond counselor Gary Hicks used a 7.45 percent estimate to figure the tax rate for this year, adding to that an amount that equaled 20 percent of the $12 million for insurance against default, which was placed into an impound account. Kimmel termed the 20 percent a reserve, and both men said it didn’t need to come this year, and it didn’t need to be nearly that high. According to Kimmel, “To put in that one-time 20 percent reserve in the first shot—that’s crazy. And to say we were going to issue $12 million in bonds at 7.6 percent, there’s no way, that’s suicide ... they’re going, ‘Great, we can save up this money and we’ll be ahead of the game.’ Well, they weren’t thinking [about] the taxpayers.” What Quincy has now is, most likely, a defunct initiative that would kill the new hospital, and a hospital board that seems, finally, to be hearing the electorate. One of those board members is calling for a facilitated meeting to work things out in a way that’s agreeable to most residents. Another has suggested a poll to take the pulse of the community at this time. They are coming up with ideas to try to resuscitate the hospital and, more importantly, to save Quincy from a destructive battle.